December 15th 2005
China may widen trading band on Yuan
In theory, the Chinese Yuan can fluctuate (read appreciate) by .3% per day. In reality, the Central Bank allows the currency to appreciate by less than .01% per day, which has limited the Yuan’s net appreciation against the USD to only .4% since the 2.1% revaluation in July. As a result, the G8 governments are clamoring with renewed vigor for China to further revalue. In fact, a rumor has been circulating that China will widen the Yuan’s daily trading bands to 1%, which would enable the currency to appreciate faster. Many analysts expect the Central Bank to announce such a move before the Chinese New Year on January 29th. Bloomberg News reports:
“Given the track record of the Chinese government preferring to announce key policy changes ahead of long holidays, it’s convenient for the market to anticipate the next key move on the renminbi could come in the later half of January,” said one analyst.